Minimum payments to increase for MBNA customers

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CREDIT card behemoth, MBNA, have announced plans to increase the minimum amount their customers must pay each month.

Although at least some of MBNA's five million cardholders may vehemently disagree, the company says that an increase in monthly minimum card repayments is "the right thing for all our customers".

It helps, of course, that credit card providers have been forced to make the change under new rules agreed between credit card providers and the Government which came into effect last month.

MBNA issues its own range of credit cards as well as those of Abbey, Alliance & Leicester (now owned by Santander) and Virgin Money and the changes will be rolled out across all these brands.

However, although an increase will help credit cardholders get out of debt more quickly (indeed, as we note here, there's good reason to pay more than the minimum) it could hurt those unable to make the repayment at the new, higher, rate.

Defaulting on a credit card account can lead to fees and the withdrawal of any special offers on the account, considering that those unable to pay are also highly likely to be those with severe debt problems.

Existing customers affected

The new system will require a payment of at least 1% of the card's balance with any charges and interest added on top of that.

New customers have been subject to that calculation since mid-2009 but from April 1st the company will also be applying it to existing customers.

In 2009, the provider's spokesperson said: "From a customer's point of view, the change is a good thing as the more debt they pay off, the better, but clearly, if some people can't afford to pay [the new minimum repayment] then they can come to us and we'll try to resolve it."

The company's more recent application of its minimum payment plan had a similar justification and a similar offer of help.

Problems for those in debt

MBNA said that as a result of the change, its customers, "could save significant amounts of money over time, and pay their balances off much more quickly".

While this is theoretically a good thing, however, it will prove problematic for MBNA customers who have large outstanding balances on their cards.

A cardholder with a £2,500 balance on a card with a 16.9% APR will see their minimum payment increase from £37 to £57 - a sizable leap for someone already struggling to meet payments.

Indeed, in 2008 card providers halved their minimum repayment amounts to make it easier for cardholders to repay debts.

The company accepts that the increase may be "a significant change" for some of its cardholders, and encourages those who are struggling to get in contact. Those who are already behind with payments will not be subject to the changes, unless they manage to bring their account back up to date, in which case they are fair game.

A spokesperson said: "For most cardholders who either pay their credit card bill in full every month or pay more than the minimum, the change will have little or no impact.

"Only a small percentage of our customers make only a minimum payment in any one month, and the number routinely making only minimum payments is even smaller."

MBNA's announcement follows recent criticism over the way they deal with customers in debt.

The Office of Fair Trading ordered the company to improve the procedures of its debt collection arm after an investigation revealed that it was being wilfully obscure when dealing with customers who had fallen behind with repayments and had offered smaller monthly amounts that they could afford.

It was also accused of bypassing cardholders' appointed debt management companies and contacting them directly.


31 January 2012

I have a credit card balance of £11,000. I have never missed a payment but they keep increasing my minimum payment, this month it is £369.00. Incredible, even the highway man wore a mask.

11 July 2011

I have been with MBNA for over 14 years and have never missed a payment.

My minimum payment has gone up by over 150%. If you explain to them it would be a great squeeze on cash flow and you would find it difficult to make the minimum payment, they don't care. Their reply is to suspend your account immediately, and inform you if the minimum payment is not met it will affect your credit rating.

Don't expect any help in reducing the crippling interest rate. I really don't understand how in the current economic climate they are allowed get away with this.

On one of my account statements I noticed the interest had shot up by £75 . When I called the office, they said, because I changed my direct debit date three days ahead the interest is more by £75. Now, the reason I changed the direct debit was because MBNA was withdrawing the monthly payments 3 days before the agreed date and therefore causing my bank account to go into unauthorised borrowing. This in turn meant I had to pay £30 for unauthorised borrowing each time. This has occurred 20 times.

In December MBNA took the minimum payment 4 days before the due date without notice. Does anyone know if this is legal?

11 July 2011

In effect they have changed the terms of our original credit agreements! What's stopping them from increasing minimum payments even more? Being held to ransom springs to mind. I have had my account for years trouble free. I may ask them to send me a copy of my original signed agreement and check that it states they can do this. If it doesn't things could turn interesting!

7 June 2011

I have a balance of £11k after a messy divorce and my minimum payments have gone up by over £110 per month. MBNA have ramped my interest from 16.4% when I took the card out to over 30% since I have been experiencing difficulties. This repayment is basically a mini IVA and returns my interest to 12.7%. Thanks MBNA, you really don't care about your customers in the slightest. I'm now over my overdraft and will be contacting the ombudsman today.

7 June 2011
Elaine f

How does raising the minimum payment help people, do we not have the right to pay back what we feel we can afford. Increasing payments by 50% is drastic for me, is there anyone out there that legally knows how this can be stopped and allow people to have freedom of choice, this is very depressing.

31 May 2011

My wife has a credit card with MBNA. My wife and myself have been customers of this bunch for years. We have three children now and my wife has a balance of £6500. She now works two mornings per week as a teacher which I cover as I have the flexibility of working weekends. Times are very hard for us and MBNA's announcement has now meant we can't meet their repayments. I contacted MBNA who offfered her some form of repayment plan as we are obviously in a position not to pay "this will impact on your credit rating". Well, we were paying ok before till they moved the goal posts on us. Why should we have our credit rating impaired because we used to be able to afford to repay them. I am still fighting the position. Please let me know if anyone has any ideas. My advice is to avoid MBNA!!!

24 April 2011
David P

I used the whole of life 6.9% transfer fee about 12 months ago, knowing that the minimum payment would only be about £90 per month, this was a very low monthly cost for releasing some £13,000 of funds. I planned to pay off bigger chunks when I could afford to. Now, this flexibility has gone and I'm going to pay a minimum payment of about £220 per month. I initially paid a 3% fee for the money transfer - the fair thing for MBNA to do would be to return this fee to me. After all, they have moved the goal posts! I have never missed a payment and am a high earner so can afford the new monthly payments. But, I'm not happy!

18 April 2011
Jon W

Normally, when a change in conditions that could have a major impact upon customers is introduced, there is an opt out which effectively freezes the account on the conditions prior to the change if you surrender your card. No such opt out is being offerred for this change!
My wife's minimum payment has increased by £100, "come to us and we'll try to resolve it." turned out to be putting her in contact with a loan company 'with whom MBNA have an arrangement' who tried to sell her a secured loan for only part of the balance. Financial Service Ombudsman here we come!

15 April 2011

I rang MBNA as I owed them £10.000. I had always paid over min, never late paying, never missed a payment, 2 yrs ago for no reason they would give me, they stopped my card even though I had a 98% credit rating. I am 70 yrs old, and on a fixed income. They offered to "Help" and stated they would put me in touch with their specialist team, I asked them if this would be put onto Credit Reference agencies and effectivly cause me to lose ALL my credit cards, and get a bad credit rating, preventing me from obtaining credit, and they said it would. I then wrote to the office of fair trading, and lodged a complaint, I advise all MBNA card holders to get in touch with the O.F.T. we bailed the Banks out, and this is how they treat us.

14 April 2011

My balance is £8500 (paid for the wedding). My minimum repayment was £173 this month. Next month it'll be £268! How is that helping me?!

12 April 2011
Peter B

To give a slightly more extreme example, a balance of £12,000 with 6% on life of balance, had to pay between £70 and £80 per month, increased to between £190 and £200 per month, I was a bit surprised since I did not know this was coming, fortunately, I can afford it but the money would be better used paying off higher interest borrowing. Not a happy customer.

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